The Gold thread

yea I agree with the above postings, I hold silver bullion and was thinking of getting out a month ago with a view to getting back in, but didn't. However speculation is driving the market crazy. But I think this will ensure that the bull market will last an awful lot longer as most people are still afraid to buy into it due to the high volatility.
What do people think about commodities in general, do they really believe in the commodities bull market story lasting many years.
 
hi joe..i feel we are only at the beginning of what will be a long bull run for commodities....i suggest you have a read of mark shipmans book new book ' the next big investment boom' as well as discussing his reasons why commodities will prosper, he has some very good guidelines of how to watch out for a get involved in trends.......the trend is your friend.
 
Is there any more liquid way of buying silver than silver bullion which I have. I know that you can buy gold like a stock on the NY stock exchange with the ticker GLD. I also heard that this is will be possible for silver. Does anyone know more about this. This is essentially the reason why I failed to take advantage of the last upswing as it was too cumbersome to liquidate my positions. However I am in silver for the long haul maybe it is a dummies game to try and take advantage of big upswings.
 
Gold shares have bounced as I hoped for, HUI was up dramatically yesterday and I expect more in the coming days. Even with gold at mid US$500 these gold producers will make a tonne of profit. Im going to unload a few % points here as I feel the market has yet to flush out completely (am expecting another down leg for stock markets generally b/n now and Sept/Oct). Looking to buy some bullion here, waiting for the magic US$550 though !!

Keep the faith in gold though. The story hasnt played out, we're still not out of the early stages of this run. The herd has yet to embrace the role of bullion as an inflation hedge, let alone drive it to bubble levels. And as I've said inflation is NOT going away anytime soon. We'll need a much more aggressive stance by CBs, and despite the recent saber rattling, I dont believe they have the cajones. At the first sign of recession the CBs will reinflation the money supply (cut rates)

Good luck!
*****************************
ps: was in Berne, Switzerland recently and bought some bullion over the counter at Credit Suisse bank. You can buy from any swiss bank up to 1kg of the stuff, commissions are 2-7% on Zurich(?) price. Unbelieveable, what a country!
 
walk2dewater said:
And as I've said inflation is NOT going away anytime soon. We'll need a much more aggressive stance by CBs, and despite the recent saber rattling, I dont believe they have the cajones. At the first sign of recession the CBs will reinflation the money supply (cut rates).
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walk2dewater you have said this a couple of times and if it is true it is certainly a very good reason to buy gold. However I don't see where you are getting the idea "At the first sign of recession the CBs will reinflation the money supply (cut rates)".

You are obviously talking about a stagflation scenario because otherwise cutting rates is the logical thing to do in a recession and it doesn't cause inflation. Given a stagflation scenario - which I also believe is quite plausable - it becomes a moot point as to whether or not the CB's will behave as you suggest. Looking at the ECB I think it is very unlikely that they will cut rates in such a situation. Since:

1) They are legally mandated to keep inflation within a certain band
2) Their professional credibility depends on keeping inflation below a certain point
3) The ECB has inherited some of the Bundesbank's legendary inflation fighting traditions.

For these reasons I think the ECB will always prioritise inflation control over growth and it would take a change in instutional structure by European politicians to change this - and given how long it takes to change anything in the EU - even when there is agreement, such changes are unlikely to be implemented until after our "current situation" has passed.

I think you may have a stronger case in the case of the Federal Reserve. Its mandate seems to be less clear and I suspect it is more open to political pressure - even so I still don't see it letting inflation getting wildly out of control
 
darex said:
You are obviously talking about a stagflation scenario
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Yes I am. We are in the endgame though, and the next installment will be deflation. But not before a final spike in inflation that will send the price of gold bullion soaring and mark the beginning of a nasty recession. Just before deflation you'll want to shift back to cash and bonds of political secure, well governed, resource-rich countries, and it wouldnt be a bad idea to own your home sans mortgage. I'm speaking generally, globally. I know this is bleak, but don't blame me!
 
walk2dewater said:
Just before deflation you'll want to shift back to cash and bonds of political secure, well governed, resource-rich countries, and it wouldnt be a bad idea to own your home sans mortgage. I'm speaking generally, globally. I know this is bleak, but don't blame me!
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I guess the key will be to get out of gold and into cash near the peak. Might be a very tough one to time.
 
Could tightening liquidity be good for gold. In other words if interest rates rise alot then people with huge debts will simply default on their debts. if they default on their debts then the banks could be in danger. In that scenario savers would get worried about the safety of their bank deposits and move their savings from banks to gold.
 
Of the dozen of so scenarios I can think of gold comes out on top in every one.

ps: Wholesale defaulting on debt has similar effect as hyperinflation, fiat money quickly becomes worthless. cf. Weimar Germany, etc.
 
walk2dewater said:
Of the dozen of so scenarios I can think of gold comes out on top in every one.
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What about if ...

All the world's central bankers successfully negotiate the delicate tightrope of raising interest rates sufficiently to combat inflation but manage to avoid killing economic growth. At the same time, asset bubbles like housing don't collapse completely but experience the much vaunted "soft landing".

Inflation drops to an entirely spurious index level of below 2% and the rate rises stop. The bull market in stocks continues unabated, everyone hails the brilliance of the central bankers and any shaken confidence in fiat currency is restored ...

It could happen you know.
 
room305 said:
What about if ...

All the world's central bankers successfully negotiate the delicate tightrope of raising interest rates sufficiently to combat inflation but manage to avoid killing economic growth. At the same time, asset bubbles like housing don't collapse completely but experience the much vaunted "soft landing".

Inflation drops to an entirely spurious index level of below 2% and the rate rises stop. The bull market in stocks continues unabated, everyone hails the brilliance of the central bankers and any shaken confidence in fiat currency is restored ...

It could happen you know.
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right, the perpetual motion machine scenario... :)
 
What about the scenario where everyone sells each other property for higher and higher prices thus generating equity which is used to leverage into more property which gets sold on at an even higher price thus generating equity which is....
er... sorrry wrong thread
 
"What about if ...

All the world's central bankers successfully negotiate the delicate tightrope of raising interest rates sufficiently to combat inflation but manage to avoid killing economic growth. At the same time, asset bubbles like housing don't collapse completely but experience the much vaunted "soft landing"."

Its either one or the other. Either they kill off inflation by raising interest rates substantially which would cause all the asset bubbles to collapse leading to widespread debt default. Or they let inflation rise but also raise interest rates modestly under the pretext of fighting inflation thereby preventing asset bubbles from bursting. From reading many commentaries central banks are alot more afraid of bursting asset bubbles than inflation. Therefore I think inflation will be allowed to run thereby reducing the real debt that people will have to pay back.
 
joe sod said:
Either they kill off inflation by raising interest rates substantially which would cause all the asset bubbles to collapse leading to widespread debt default. Or they let inflation rise but also raise interest rates modestly under the pretext of fighting inflation thereby preventing asset bubbles from bursting.
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Surely even modest interest rate rises greatly increase the likelihood of asset bubbles bursting? These bubbles were created by an excess of global liquidity due to extremely low interest rates, this encouraged borrowing and speculation leading to price increases. Eventually, they became the self-perpetuating cycle that currently existing in the Irish housing market. Increasing borrowing costs will put this process into reverse.

The inflation index doesn't include the cost of housing, Icelandic bonds, emerging market indexes, industrial metals or any of the other numerous bubbles that have sprung up around the world. Since the ECB exists to fight inflation, issues like economic growth or how much you paid for your house are incidental to the great inflation fight.
 
There is an assumption in this thread that "true" inflation is much higher than the headline rates of inflation that are targeted by the central banks. This argument is obviously critical for the whole buy gold thesis because otherwise to retain value (as distinct from increasing it) you would just stick your money in a savings account and earn 3% interest which is roughly the same as the headline inflation rate.

I would be interested if anyone has any references to back up the idea that true inflation is much higher than the headline rates of inflation.
 
darex said:
I would be interested if anyone has any references to back up the idea that true inflation is much higher than the headline rates of inflation.
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The costs of owner-occupied housing aren't included except, if I remember correctly, for some costs of repairs.

Also, if you strip out luxury goods and only include essential goods, then the inflation rate jumps to about twice the official rate.

However, I tend to look at the rate of increases of pay for civil servants, politicians and company ceos. How happy do you think they would be to have their salaries linked to the official inflation rate?
 
Market volatility spoils the SSIA party

Just when everything was going swimmingly well, along came a stock market slump which gave equity SSIA holders a kick in the financial pants

And accountant Cyril Keegan, a partner in Dublin-based private accountancy practice Command, also counsels against abandoning the stock markets because of recent jitters.
"The fundamentals in the markets are quite good. Commodities like gold are weak, which is an indication that confidence is coming back."

Just a few quotes from an article in todays independent. Dont worry everythings OK again cos gold is weak, what simplistic drivel ... I think the equity based SSIAs will suffer alot more losses before the period is up.
 
joe sod said:
Just a few quotes from an article in todays independent. Dont worry everythings OK again cos gold is weak, what simplistic drivel ... I think the equity based SSIAs will suffer alot more losses before the period is up.
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To be fair, they did warn that anyone alarmed by volatility should probably switch to cash or bonds. It really depends on how long people are willing to stick with their investment.

As for gold being weak? It has bounced back impressively from its May lows but it is definitely not an investment for someone concerned about volatility.
 
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